Soon from Searching ... Building Qualitative Research Into Business Planning And Short-Term Forecasting

Searching Finance will soon be publishing Bruce Garvey's new whitepaper: Building Qualitative Research Into Business Planning And Short-Term Forecasting.

Some more about Bruce:

Bruce Garvey is a founding partner of Strategy Foresight Partnership LLP, which deals with problem structuring for highly complex issues occurring under genuine uncertainty, using innovative methodologies for a wide range of public and private sector clients.

This followed an earlier career with a major multi-national in a number of staff and operational posts in the UK, Europe and the Middle East. Subsequently he has run and advised a number of SMEs as founder, company director (including non-executive), mentor, advisor and consultant. He recently stepped down from a 6-year tenure as Chairman of Cass Entrepreneurs Network (CEN): Cass (City) Business School.

He is also a Freeman of the Worshipful Company of Management Consultants and a member of the IOD (including its City Branch).

In order to enhance the research input into SFP Bruce has recently begun a PhD research programme at Imperial College London in the area creativity and innovation in the engineering/design sector. He also has MBA from Cass Business School.

Forecasters often claim that short-term forecasting[1], with its limited time horizon, allows the identification of enough key, essentially quantitative, indicators to produce acceptable results. This is in comparison to forecasting long-term economic trends confronted with too many uncertain variables to contend with.

More about the paper

This paper argues that there been an over zealous use of quantitative methods used by forecasters and planners for short-term projections.

We need to evaluate how more adaptive and dynamic planning systems, using a combination of both quantitative and qualitative information can challenge orthodoxy. Secondly the paper argues that the traditional annual planning and budgeting cycle is insufficiently flexible to meet the demands of today’s rapidly changing and uncertain environment, and thirdly, that a greater balance of quantitative and qualitative methods need to be introduced into short-term forecasting. Finally a framework is proposed bringing together qualitative and quantitative factors into play through an Adaptive Planning System (APS).

History examines the impact of past events.

Proximity to an event having occurred in relation to a contemporary standpoint is no guarantee that an objective interpretation can be made. This concept of recency is misused and often exploited by stakeholders. It can be argued the more recent the event, the less likely researchers will have access to all the “facts”. The effects of many events do not become apparent until much later (months, years, decades and longer), impacted by lengthy gestation periods before unforeseen and unintended consequences manifest themselves. The evidence base can also be “contaminated” by “the Loss of History” – data that is either deemed to be not worthy of recording, is physically misplaced, re-written, deleted or classified– and by seeding of “fake” data, not to mention “sensitive dependence on initial conditions” – also known as chaos.

Challenged by accuracy of interpretation of even recent events – how can we expect to extrapolate with any certainty or accuracy into the future, short or long term?

[1] [1] For the purposes of this paper “short-term” is defined as being within the annual planning cycle of 12 months with by far the greater emphasis on the forthcoming quarter. Such forecasts will often include a quarterly breakdown for the second year of the plan. The expression “long-term” is somewhat a movable feast. Many organisations use the term to cover the 3 to 5 year period, other up to 10 years, a few to 20 or even 30 years out. Perceptions of what exactly is the long term are very often dictated by the nature of the business sector. The financial sector largely operates within a much shorter time horizon with anecdotal evidence claiming that 1-3 months is short-term and anything beyond that is long-term. On the other hand in sectors such as the life-sciences, extractive industries and aerospace/defence, characterised by long product discovery and development times short-term is seen as extending up to 5 years out with the long-term defined as any period beyond this.